Fox ally stood to make millions from 38 Studios, documents reveal

Thursday

May 22, 2014 at 11:01 AM

Michael Corso, the Rhode Island lawyer and tax-credit broker who helped bring 38 Studios to Providence through his friendship with then-House Speaker Gordon D. Fox, stood to make millions of dollars from the deal, according to documents a “38 Studios insider'' provided to House Oversight Committee chairwoman Karen MacBeth.

Katherine Gregg Journal Political Writer kathyprojo

PROVIDENCE, R.I. – Michael Corso, the Rhode Island lawyer and tax-credit broker who helped bring 38 Studios to Providence through his friendship with then-House Speaker Gordon D. Fox, stood to make millions of dollars from the deal, according to documents a “38 Studios insider'' provided to House Oversight Committee chairwoman Karen MacBeth.

From his office at 155 Chestnut Street, Corso presided over the Kingston Capital Group, the Preservation Credit Fund and Orb Development, created on Jan. 17, 2008, before the infamous “loan guaranty'' legislation that paved the way for 38 Studios had worked its way through the legislature.

Orb was promised a “development fee in the amount of 10 percent'' of 38 Studios' projected $10.3 million construction-budget, “but no less than $500,000.'' Corso's role in Orb: “registered agent,'' according to company filings with the secretary of state.

The documents provide a who's who of construction companies and managers that had a hand in the rehabilitation of 38 Studios' new headquarters on Empire Street, in Providence.

Corso was initially hired by 38 Studios “to pro-actively identify short-term bridge financiers for the company,'' in exchange for a 9.5-percent “success fee.''

The letter of engagement that 38 Studios Chief Operating Officer William Thomas wrote Corso is undated, but it enlists the services of his Kingston Capital Group from July 1-Sept. 30, 2010.

It is unclear if this agreement encompassed the $75-million state-backed loan that Rhode Island's economic-development agency agreed to give retired Red Sox pitcher Curt Schilling's video-game venture in July 2010, as an inducement to move his company from Maynard, Mass., to Providence.

But this initial agreement with Corso's Kingston Capital says: “KCG has certain knowledge including existing relationships and investing experience in the private and public financing industry. KCG will use all existing relationships, contacts and methodology to identify and introduce potential financiers to the company.''

“The company shall have the right to accept or reject any potential introductions and shall pay KCG a success fee only if a relationship is consummated with a KCG introduction,'' the agreement says.

Among his responsibilities: to “prepare an introduction list … contact each potential party and introduce them to 38 Studios.''

Corso did not respond Thursday to requests for comment on the agreements, which in some cases may have supplanted one another.

It is also unclear how much he ultimately got paid for his role in the 38 Studios saga, though he is described in 38 Studios' bankruptcy filings as both a creditor and someone who was paid an unspecified amount for various services.

Early in 2010, Corso helped arrange a pivotal meeting between Fox and Schilling in his downtown Providence law office. That led Fox and his ally, then House Finance Chairman Steven Costantino, to add $75 million to a $50-million job-creation loan guarantee bill that was approved by the legislature.

According to bankruptcy papers, 38 Studios owed Corso at least $77,600 when it closed its doors, and also owed his Preservation Credit Fund $11.5 million for the anticipated Rhode Island tax credits he used as security for Bank RI loans.

The court file also shows that Corso was paid $232,800 on March 30, 2012 – one month before 38 Studios missed a $1.12-million payment to the state that precipitated its demise. The list does not state what the payment was for.

On November 7, 2010, 38 Studios' Thomas signed a “development services agreement'' with Orb Development, a limited liability company at 155 Chestnut Street that was created on April 10, 2010, and lists Michael D. Corso as its registered agent.

The company promised to pay Orb a “development fee in the amount of 10 percent of the construction budget, including the landlord building improvement budget….but no less than $500,000…not later than June 1, 2011.''

Among his duties: to engage and oversee an architect, designer, general contractor and anyone else hired for the rehabilitation of 38 Studios' new home at One Empire Street, “act on behalf of the company with federal, state and local government authorities with respect to the constructions….zoning, building codes, occupancy permits….[and] prepare or cause to be prepared a budget for the project, including…design, furniture and fixture expenses.''

In a letter dated November 10, 2010, Corso wrote 38 Studios CEO Jennifer MacLean to confirm the terms of his role as a $485-an-hour consultant to the company. That letter appears to have been signed by Thomas on December 7, 2010.

“As required by Rhode Island rules of professional conduct, I am writing to confirm the terms of my representation,'' Corso wrote.

“You have requested that I represent the company with respect to a preliminary evaluation of any potential economic incentive programs available to the company in multiple jurisdictions…and [make] recommendations with respect to the various courses of action.''

Still doing business as Kingston Capital at 155 Chestnut Street, he subsequently won a $300,000 consulting services agreement, dated January 1, 2011, that has drawn previous attention.

He was hired at that point to render “general business consulting services, including but not limited to public and government relations services, media interactions, reviewing press releases and other media statements, community integration with the local business community, interactions with government agencies and various public officials.''

All the while, he was doing business as a tax-credit broker, buying up the rights to market the Rhode Island tax credits that 38 Studios anticipated in exchange for all of the state-backed loan money it spent developing “Kingdoms of Amalur: Coperncius 2012'' and its sequel.

The way it works: the state offers tax credits equal to 25 percent of the “qualified expenses” of a movie, TV show or video game produced in Rhode Island that the producer can then sell to one of the small cadre of brokers who buy them at a discount and then resell them, at a profit, to people and businesses with Rhode Island income tax liabilities.

At one juncture, Corso and Thomas signed an undated document titled – “Assignment of Tax Credit Rights'' – in which Corso's Preservation Credit Fund agreed to pay $7.56 million to 38 Studios for $12 million in anticipated “RI motion picture production tax credits'' for Kingdoms of Amalur.''

The agreements anticipated delivery in two installments by June 15, 2012 ,and April 1, 2013. By then, the company had closed its doors and filed for bankruptcy, leaving Corso liable for the tax credits he had pre-sold.

As the company sank into oblivion in June 2012, The Journal reported that Corso had obtained $8.5 million in loans for the cash-starved video-game company.

The loans were secured by $14.3 million in anticipated film tax credits that never materialized and the former Boston Red Sox star's collection of gold coins.

According to Rhode Island financial filings, Corso borrowed the money in January and February from Bank RI, secured by the Rhode Island film tax credits, which had yet to be issued but which had received “initial certification” from the Rhode Island Film & Television Office.

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